Hong Kong Stocks Fall as China Rules Out Massive Stimulus - Bloomberg

By Jonathan Burgos and Adam Haigh - 2012-05-30T08:45:16Z

Hong Kong stocks fell, with the Hang Seng Index (HSI) snapping a three-day advance, on a report China has no plans to introduce large-scale stimulus as it did during the global financial crisis and after Spain’s sovereign-credit rating was cut.

Industrial & Commercial Bank of China Ltd., the world’s biggest lender by market value, slid 1.7 percent. Belle International Holdings Ltd. sank 3.2 percent after the Standard newspaper reported China’s largest retailer of women’s shoes expects slower sales growth this year. Esprit Holdings Ltd., a clothier that counts Europe as its biggest market, declined 2.7 percent. Cnooc Ltd., China’s No. 1 offshore oil producer, fell 1.9 percent as crude futures dropped.

“The Chinese authorities do see downside risk to growth this year,” said Dwyfor Evans, a Hong Kong-based macro strategist at State Street Global Markets, part of State Street Corp., which has $1.9 trillion under management. “They will continue addressing the slowdown, but it’s hard to assess if it will be enough.”

The Hang Seng Index dropped 1.9 percent to 18,690.22 at the close, with all but five shares declining in the 48-member gauge. The equity benchmark is heading for a decline of about 11 percent this month, the most since September, on concern Europe’s debt crisis will worsen and China’s economic slowdown is deepening. The fall pared this year’s advance to 1.4 percent.

Trading volumes were about 13 percent higher than the 30- day moving average, according to data compiled by Bloomberg News. The Hang Seng China Enterprises Index (HSCEI) of mainland stocks decreased 1.7 percent to 9,690.67.

Agricultural Bank

Agricultural Bank of China Ltd., the country’s third- biggest lender, sank 4 percent to HK$3.12 after the Caixin magazine reported that Vice President Yang Kun is under investigation by the Chinese Communist Party’s Central Commission for Discipline Inspection.

Chinese banks also declined after Xinhua News Agency reported yesterday that China is seeking to stabilize growth in the world’s second-largest economy and has no plans to roll out massive stimulus measures on the scale that it did to coutner the effects of the global financial crisis in 2008.

Industrial & Commercial Bank of China (1398) declined 1.7 percent to HK$4.65. China Construction Bank Corp., the nation’s second- largest lender, slipped 1.1 percent to HK$5.25.

Belle International (1880) slipped 3.2 percent to HK$12.72. Same- store sales in April and May were better than the first quarter but still lagged last year’s growth, the Standard newspaper reported, citing Chief Executive Officer Sheng Baijiao. The company expects sales growth will slow to between 5 percent and 9 percent this year from 15 percent last year, according to the report.

The benchmark Hang Seng Index has slumped about 14 percent from this year’s peak, dragging the value of shares on the gauge to 9.5 times estimated earnings on average as of yesterday. That compares with 12.7 times for the Standard & Poor’s 500 Index and 10.1 times for the Stoxx Europe 600 Index.

Spain Downgrade

Companies that do business in Europe dropped after Rating & Investment Information Inc cut its sovereign-credit rating for Spain to A from AA on concern the government will struggle to reduce its fiscal deficit amid growing downside risks for the economy.

Esprit sank 2.7 percent to HK$12.46. Hutchison Whampoa Ltd. (13), which operates ports in Germany and Spain, slipped 2.1 percent to HK$65.05. HSBC Holdings Plc, Europe’s biggest lender by market value, declined 2.8 percent to HK$61.25.

Raw-material producers fell after a gauge of metal prices in London fell for the first time in four days yesterday. Copper for three-month delivery and crude oil futures headed for a second day of decline today.

Jiangxi Copper Co., China’s biggest producer of the metal, slid 1.4 percent to HK$16.74. Aluminum Corp. of China Ltd., the nation’s No. 1 supplier of the light metal, lost 0.3 percent to HK$3.38. Cnooc fell 1.9 percent to HK$14.20.

Futures on the Hang Seng Index expiring this month dropped 1.4 percent to 18,695. The HSI Volatility Index (VHSI) advanced 6.3 percent to 28.12, indicating that traders expect a swing of about 8.1 percent in the next 30 days.

To contact the reporters on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net; Adam Haigh in Sydney at ahaigh1@bloomberg.net

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net